United States CFTC Charges BitMEX Owners!

[GreatArkansas]

Few hours ago US Commodity Futures Trading Commission (CFTC) released a charges on Bitmex owners for illegal operating cryptocurrency  derivatives and anti-money laundering violation.
Here is the press release of CFTC: https://www.cftc.gov/PressRoom/PressReleases/8270-20

Charged Bitmex owners are Arthur Hayes, Ben Delo, and Samuel Reed.

Bitmex already released their statement 2 hours ago regarding of the charges by CFTC here: https://blog.bitmex.com/united-states-cftc-doj-filing/

In the meantime, the BitMEX platform is operating entirely as normal and all funds are safe.

So, there are still no effects as of now on the Bitmex users and still operational. But it's really scary. Do you have still funds on Bitmex and you still continue to trade here?

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[Mahanton]

So, there are still no effects as of now on the Bitmex users and still operational. But it's really scary. Do you have still funds on Bitmex and you still continue to trade here?

After i had able to read up the entire news then i do immediately withrawn all of my funds for the fear of some lock-up or being disabled.For now i do just let my funds do stay away on this platform and observe on what would be the next word, because i cant just let myself too confident on leaving my coins behind specially if you do know that U.S. Commodities and Futures Trading Commission (CFTC) is now involved.Next in line would be Binance and Bittrex.News like this can really trigger out some panic sell but i cant let myself not to believe into that possibility.

[bbc.reporter]

@GreatArkansas. They want everyone to relax hehehe.

Bitmex mass withdrawals might occur similar to a bank run after release of this news, I reckon. Its users should try to withdraw, however, it would not be shocking if Bitmex blocked them.

There is also the danger of a government takedown of the domain.

[mk4]

Samuel Reed was apparently already arrested, while Arthur Hayes and company is apparently "at large". There was some rumours from some Twitter personalities last year about BitMEX already being somewhat "observed" by the fed, and up to yesterday everyone(including the U.S. BitMEX users) were being too comfortable with using the platform. And suddenly, BOOM, CTO/Co-Founder suddenly arrested. This news is completely nuts! Wouldn't be surprised if other exchanges(even the spot-trading ones) will come next.

Another reason to not unnecessarily store funds on exchanges, ladies and gentlemen.

[hugeblack]

It is not the first time for a panic to occur, but the occurrence of any problem related to withdrawal or liquidity or trading will cause this panic.
Khaled is famous for a lot of dark activities so be careful when you deal with them.
I do not think that anyone will withdraw a lot of money because of this news, and if you have put a lot of money on that platform then I think you know some rationale for that.

[o_e_l_e_o]

I am no fan of centralized exchanges, but this is nonsense. US citizens are not allowed to trade on BitMex, and BitMex itself is incorporated in the Seychelles. This is the US government/associated agencies trying to police the world again. Also, banks launder money in far greater amounts all the time, and instead just get slapped with measly little fines that they don't even feel. But as soon as a bitcoin exchange is suspected of the same thing, the owners are arrested? This should be seen as an attack on bitcoin.

If you have any funds on BitMex, I would be trying to withdraw them ASAP. If the FBI are arresting the owners, you can guarantee they will be trying to seize assets as well.

[AdolfinWolf]

Samuel Reed was apparently already arrested, while Arthur Hayes and company is apparently "at large".

Huh, that's kind of interesting.

If i remember correctly, didn't bitmex say they used a 3/4 multisig wallet split between the founders?

With two of the founders being arrested already, EDIT I misread the article, it's just Reed who is arrested as of right now. - Still, this poses a gigantic risk. One more arrest and all of their funds will basically be stuck in limbo, depending on their exact setup.

Although i can't ascertain whether this was only for the insurance funds, or also for normal withdraws/deposits. (I believe it was/is also for customer deposits, which could prove even more disastrous, no?)

If you have any money left on Bitmex, I'd withdraw A$AP.

So, there are still no effects as of now on the Bitmex users and still operational. But it's really scary. Do you have still funds on Bitmex and you still continue to trade here?

They're basically running a 3/3 multisig now with indictments out for the other three two founders. I would be extremely cautious, as these will probably convert into arrest warrants if they aren't already.

Perhaps their wallet keys are in the hands of a (for them) trusted third party, in which case Bitmex probably won't suffer that much operational difficulties, but I've yet to hear/get confirmation of this.

[Natalim]

https://www.cftc.gov/PressRoom/PressReleases/8270-20

Washington, D.C. — The Commodity Futures Trading Commission today announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York charging five entities and three individuals that own and operate the BitMEX trading platform with operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures. This case is brought in connection with the Division of Enforcement’s Digital Asset and Bank Secrecy Act Task Forces.

This is a huge violation, I have a feeling that they won't survive on this, this isn't about the owner but the company as a whole, so I can understand if people get panic, and I think another competitor will get down soon.

[o_e_l_e_o]

If i remember correctly, didn't bitmex say they used a 3/4 multisig wallet split between the founders?

They've definitely said they use a 3-of-4 multisig, but I don't recall them ever saying who was holding those 4 keys. Given there are only the three founders - Reed, Hayes, and Delo - then there must be either a 4th "back up" key, or some employees have access to a key.

Looks like the daily 13:00 UTC BitMex transaction spam still hit the network just there, in addition to a couple of other extra withdrawal broadcasts over the last 24 hours, so funds aren't locked - yet. I would hope that if it is the two remaining founders who are signing those transactions that they have made arrangements to pass the keys on to trusted employees or similar, and that all users' funds won't become inaccessible should they be arrested.

As I said above, even if the keys are passed on, the FBI will still be looking to seize the wallets. Withdraw anything on BitMex as soon as possible. Yet another reason to start using DEXs.

[figmentofmyass]

As I said above, even if the keys are passed on, the FBI will still be looking to seize the wallets. Withdraw anything on BitMex as soon as possible. Yet another reason to start using DEXs.

are there DEXs that offer 100x leverage yet?

if there are, i can't imagine they compare to bitmex's market depth.

Bitmex mass withdrawals might occur similar to a bank run after release of this news, I reckon.

over 32k bitcoins were withdrawn from bitmex in their latest withdrawal batch, after the news dropped. based on this estimate, that's in the range of 20% of their total holdings. https://www.theblockcrypto.com/post/79670/32000-bitcoin-withdrawn-bitmex-government-charges

More than 32,000 bitcoin, currently worth about $335 million, has been withdrawn from BitMEX in less than 24 hours after the U.S. government filed charges against the crypto derivatives exchange’s owners.

BitMEX currently still holds between 135,000 and 170,000 bitcoin, meaning many of its customers are staying put — at least for now.

[o_e_l_e_o]

are there DEXs that offer 100x leverage yet?

Yeah, fair point, haha. Although I'm sure one of the various Ethereum/DeFi/wrapped BTC DEXs probably offers leverage trading. Still, these things take time. The more that centralized exchanges are hacked, scam or shutdown then the more desire there is for DEXs and the more growth and development they will see.

based on this estimate, that's in the range of 20% of their total holdings.

How many people do you think have made a conscious decision to leave their coins on BitMex, and how many just haven't seen the news yet? We know from previous exchange hacks and scams that a lot of people don't pay attention to crypto news.

[Karartma1]

are there DEXs that offer 100x leverage yet?

Yeah, fair point, haha. Although I'm sure one of the various Ethereum/DeFi/wrapped BTC DEXs probably offers leverage trading. Still, these things take time. The more that centralized exchanges are hacked, scam or shutdown then the more desire there is for DEXs and the more growth and development they will see.

based on this estimate, that's in the range of 20% of their total holdings.

How many people do you think have made a conscious decision to leave their coins on BitMex, and how many just haven't seen the news yet? We know from previous exchange hacks and scams that a lot of people don't pay attention to crypto news.

To add more sauce on that think also of how many people don't pay attention and don't understand what are the implications of leaving their own coins on a third-party platform. I am afraid there's a huge risk many will learn a tough lesson the hard way.

[dkbit98]

Not surprised with this news at all, and Bitmex owner is known for manipulation and earning bunch of Bitcoins.
Many users also remember strange errors on pick traffic and they even created lot of gifs for that.

[slaman29]

To be fair, the signs were coming a long time ago already for Bitmex, and people should have seen it coming. I mean Bitmex has long been under the US radar because of how they used to allow US accounts. And the CEO has always been so vocal on Twitter now so with all their users I'm reading apparently leaving the platform, seems like the death has begun finally.

[Bttzed03]

1/ Since the announcement of the CFTC's charges against #BitMEX, over 45,000 BTC have been pulled from the exchange.

According to our data, the $BTC balance on BitMEX dropped to 120,000 BTC – a decrease of 27%.

2/ The largest drop happened on Friday (Oct 2nd), where 44,000 $BTC were withdrawn from the exchange – the largest negative net flow observed to date.

Around 30% of those funds were transferred to #Genimi and #Binance in equal amounts.

3/ #Bitcoin open interest in perpetual futures contracts on BitMEX saw a significant decline as well.

It decreased by almost 24%, from $590M to currently $450M – levels not seen since May 2020.

^ It's been days since the news and I would have expected everyone left Bitmex by now. BTC120K is still a lot and I don't understand why some traders are still not withdrawing their funds. One of them probably created this site as a response to CFTC https://bit.mex.com/ 

Perhaps Bitmex is withholding other withdrawal requests?

[figmentofmyass]

To be fair, the signs were coming a long time ago already for Bitmex, and people should have seen it coming. I mean Bitmex has long been under the US radar because of how they used to allow US accounts.

it's hard to know exactly what that would entail, if anything. remember, bitfinex offered its services to USA residents for several years before giving them the boot. bitfinex was also being investigated by the CFTC beginning in 2017, and continues to offer no-KYC accounts to this day. yet the feds never took down bitfinex or tried to arrest its owners.

the feds work in mysterious ways, and CFTC probes often end without incident. until the hammer actually comes down and arrests get made and domains get seized, it's tough to know whats gonna happen.

[exstasie]

^ It's been days since the news and I would have expected everyone left Bitmex by now. BTC120K is still a lot and I don't understand why some traders are still not withdrawing their funds. One of them probably created this site as a response to CFTC https://bit.mex.com/ 

Perhaps Bitmex is withholding other withdrawal requests?

No, on the contrary. They are processing withdrawals more often than their usual once every 24 hours:



They are in damage control mode, trying to keep their customers calm. Processing withdrawals faster than expected is one way to do that.

As a customer, I probably wouldn't be that worried about the funds. Bitmex is BTC-only and obviously keeps its servers in jurisdictions where seizure is not possible. So the authorities really can't seize customer funds.

On the other hand, there is obviously no reason whatsoever to store coins there at a time like this.

[o_e_l_e_o]

Bitmex is BTC-only and obviously keeps its servers in jurisdictions where seizure is not possible. So the authorities really can't seize customer funds.

Pesky international borders or international law/treaties have never stopped the US government or their agencies before. If they want to seize BitMex's servers or hardware then they will certainly try, regardless of which jurisdiction they are located in.

And even if they can't seize the servers or the wallets, arresting 3 people who potentially hold 3 of the 4 necessary keys has the same result as far as customers are concerned - complete loss of funds. As you say, there is no good reason to leave your coins on BitMex at a time like this, but there is certainly a huge amount of risk.

[bbc.reporter]

I am no fan of centralized exchanges, but this is nonsense. US citizens are not allowed to trade on BitMex, and BitMex itself is incorporated in the Seychelles. This is the US government/associated agencies trying to police the world again. Also, banks launder money in far greater amounts all the time, and instead just get slapped with measly little fines that they don't even feel. But as soon as a bitcoin exchange is suspected of the same thing, the owners are arrested? This should be seen as an attack on bitcoin.

If you have any funds on BitMex, I would be trying to withdraw them ASAP. If the FBI are arresting the owners, you can guarantee they will be trying to seize assets as well.

This is called gross jurisdictional overreach by the American government. I had a similar argument for Bitfinex, iFinex and Tether which many went against me. However, when I created the big short thread arguing against Tether, many were against me also. Why hehehe.

However, yes. Agreed!

[bbc.reporter]

This announcement by the United Kingdom's Financial Conduct Authority, the FCA, might be related after Bitmex's legal issue.

I have mentioned this before. I speculate that it might not stop with crypto derivatives. The bans might also begin to crawl towards real cryptocoins and legally allow only people from a higher income bracket to buy and sell bitcoin.



FCA bans the sale of crypto-derivatives to retail consumers

The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the:

inherent nature of the underlying assets, which means they have no reliable basis for valuation

prevalence of market abuse and financial crime in the secondary market (eg cyber theft)

extreme volatility in cryptoasset price movements

inadequate understanding of cryptoassets by retail consumers

lack of legitimate investment need for retail consumers to invest in these products 
These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products.

Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether or Ripple. Specified investments are types of investment which are specified in legislation. Firms that carry out particular types of regulated activity in relation to those investments must be authorised by the FCA.

Source https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers